Second Regular Session DRAFT

Sixty-seventh General Assembly 10.9.09

STATE OF COLORADO
BILL 3

LLS NO. 10-0211.01 Bart Miller INTERIM COMMITTEE BILL

Interim Committee to Study Issues Related to Pinnacol Assurance

@House1 Committees @House2 Committees

SHORT TITLE: "Workers' Comp Policyholder Prot Act 2010"

A BILL FOR AN ACT

101 C ONCERNING ENACTMENT OF THE "W ORKERS' C OMPENSATION
102 P OLICYHOLDER P ROTECTION A CT OF 2010", AND, IN
103 CONNECTION THEREWITH, REQUIRING THE DISTRIBUTION OF
104 EXCESS SURPLUS FUNDS HELD BY P INNACOL A SSURANCE TO
105 P INNACOL A SSURANCE POLICYHOLDERS AND LIMITING THE
106 INSURANCE COMMISSIONER'S DISCRETION WITH RESPECT TO
107 THE PRIOR APPROVAL OF WORKERS' COMPENSATION PURE
108 PREMIUM RATES FILED BY A RATING ORGANIZATION.

Bill Summary

(Note: This summary applies to this bill as introduced and does

not necessarily reflect any amendments that may be subsequently
adopted.)

Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.

Capital letters indicate new material to be added to existing statute.
Dashes through the words indicate deletions from existing statute.
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10.9.09

If the surplus of Pinnacol Assurance is greater than 1,000% of risk

based capital, this bill requires the board of directors of Pinnacol
Assurance to credit to the accounts of Pinnacol Assurance policyholders
a dividend to bring the surplus of Pinnacol Assurance to less than 1,000%
of risk based capital.
For the prior approval of a pure premium rate filed by a workers'
compensation insurance rating agency, this bill would require the
insurance commissioner to approve the lowest rate recommended either
by the rating organization or by the independent actuary employed by the
division of insurance, unless the commissioner explains the rationale or
justification for a different rate in the final agency order. The bill
requires background material related to a workers' compensation pure
premium rate filing to be posted on the division of insurance web site
prior to any public hearing.

1 Be it enacted by the General Assembly of the State of Colorado:

2 SECTION 1. Short title. This act shall be known and may be

3 cited as the "Workers' Compensation Policyholder Protection Act of

4 2010".

5 SECTION 2. 8-45-106 (1), Colorado Revised Statutes, is

6 amended to read:

7 8-45-106. Insurance at cost - board may impose surcharges.

8 (1) It is the duty of the board, in the exercise of the powers and discretion

9 conferred upon it by articles 40 to 47 of this title, ultimately to fix and

10 maintain, for each class of occupation, the lowest possible rates of

11 premium consistent with the maintenance of a solvent Pinnacol

12 Assurance fund, and the creation and maintenance of a reasonable

13 surplus, SUBJECT TO SECTION 8-45-112 (2), after the payment of legitimate

14 claims for injury and death, that may be authorized to be paid from the

15 Pinnacol Assurance fund for the benefit of injured EMPLOYEES and

16 dependents of killed employees.

17 SECTION 3. 8-45-112, Colorado Revised Statutes, is amended

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1 to read:

2 8-45-112. Amendment of rates - distribution to policyholders.

3 (1) The board may amend at any time the rates for any class. No contract

4 of insurance between Pinnacol Assurance and any employer shall be in

5 effect until a policy or binder has been actually issued by the board and

6 the premium therefor HAS BEEN paid as and when required by this article.

7 Not less often than A T LEAST once a PER year, the chief executive officer

8 shall tabulate the earned premiums paid by policyholders of Pinnacol

9 Assurance. Should IF the experience of the Pinnacol Assurance fund

10 show SHOWS a credit balance, and after payment of all amounts that have

11 fallen due because of operating expenses, injury, or death, and after

12 setting aside proper reserves, the board shall distribute such credit balance

13 to the policyholders who have a balance to their credit in proportion to the

14 premium paid and losses incurred by each such policyholder during the

15 preceding insurance period. In the event any such policyholder fails to

16 renew a policy with Pinnacol Assurance for the period following the

17 period in which said THE dividends were earned, said THE policyholder

18 shall be entitled to said THE credit dividend if such policy is terminated

19 in good standing. In the event IF an employer actually discontinues

20 business, said THE employer's policy shall be cancelled, and the dividend,

21 if any, when ascertained, shall be returned to the employer.

22 (2) N OTWITHSTANDING ANY OTHER PROVISION OF THIS ARTICLE,

23 IF THE SURPLUS OF P INNACOL A SSURANCE EXCEEDS ONE THOUSAND

24 PERCENT OF RISK BASED CAPITAL, THE BOARD SHALL DISTRIBUTE A CREDIT

25 BALANCE OR DIVIDEND TO POLICYHOLDERS WHO HAVE A BALANCE TO

26 THEIR CREDIT IN ORDER TO BRING THE SURPLUS OF P INNACOL A SSURANCE

27 TO LESS THAN ONE THOUSAND PERCENT OF RISK BASED CAPITAL.

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10.9.09
1 SECTION 4. 10-4-401 (3) (a) (I), Colorado Revised Statutes, is

2 amended to read:

3 10-4-401. Purpose - applicability. (3) The kinds of insurance

4 subject to this part 4 shall be divided into two classes, as follows:

5 (a) Type I kinds of insurance, regulated by prior filing and

6 approval of rating information, which shall be subject to all provisions of

7 this part 4 unless specifically excluded by the terms of a section. The

8 following kinds of insurance shall be classified as type I:

9 (I) (A) Workers' compensation and employer's liability incidental

10 thereto for any pure premium rate filed by a rating organization;

11 (B) IN APPROVING ANY PURE PREMIUM RATE FILED BY A RATING

12 ORGANIZATION, THE COMMISSIONER SHALL CHOOSE THE LOWEST RATE

13 RECOMMENDED EITHER BY A RATING ORGANIZATION OR BY THE

14 INDEPENDENT ACTUARY EMPLOYED BY THE COMMISSIONER, UNLESS THE

15 COMMISSIONER EXPLAINS THE RATIONALE OR JUSTIFICATION FOR A

16 DIFFERENT RATE IN THE FINAL AGENCY ORDER. P RIOR TO ANY PUBLIC

17 HEARING TO CONSIDER A PURE PREMIUM RATE FILED BY A RATING

18 ORGANIZATION, THE COMMISSIONER SHALL POST ON THE DIVISION OF

19 INSURANCE WEB SITE THE COMPLETE RECOMMENDATIONS AND

20 SUPPORTING MATERIALS OF ANY RATING ORGANIZATION AND THE

21 INDEPENDENT ACTUARY EMPLOYED BY THE COMMISSIONER, INCLUDING

22 ANY RATIONALE FOR RATE CHANGES.

23 SECTION 5. Act subject to petition - effective date -

24 applicability. (1) This act shall take effect at 12:01 a.m. on the day

25 following the expiration of the ninety-day period after final adjournment

26 of the general assembly (August 11, 2010, if adjournment sine die is on

27 May 12, 2010); except that, if a referendum petition is filed pursuant to

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1 section 1 (3) of article V of the state constitution against this act or an

2 item, section, or part of this act within such period, then the act, item,

3 section, or part shall not take effect unless approved by the people at the

4 general election to be held in November 2010 and shall take effect on the

5 date of the official declaration of the vote thereon by the governor.

6 (2) The provisions of this act shall apply to the surplus held by

7 Pinnacol Assurance and to any pure premium rate for workers'

8 compensation and employers' liability incidental thereto, subject to

9 approval of the insurance commissioner on or after the applicable

10 effective date of this act.

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